Strategic Planning: Key
Concepts
1-8
Steps in Planning
Market Segmentation
Attractiveness: 5 Forces
Generic Strategies
The Firm Value Chain
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John Macomber 1
Industry and Segment
Selection (Ch. 7)
• You can select a segment in which to
compete
based on how profitable the structure should
be in the long term.
• You can decide how to compete
based on industry structure and the resources
you have.
• You can shape your firm so that you can
execute on this strategy
with deliberation and efficiency.
Strategic Management
John Macomber 2
Indicators of Segment Profitability:
“Five Forces” Model - M. Porter
Barriers to
Entry
Supplier
Bargaining
Power
Barriers to
Exit
Existing
Rivalry
Availability of
Substitutes
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Buyer
Bargaining
Power
Attractiveness of an Industry
or of a Segment is a function
of these forces.
Use them in selection of
segments - and in defense of
segments.
John Macomber 3
About the Five Forces (Ch. 1)
• The collective strength of the five competitive
forces determines the ability of firms in an
industry to earn high rates of return on their
invested capital.
• The strength of the five forces varies from
industry to industry, and can change over time.
• The five forces model can be applied to an entire
industry, or to segments of an industry.
• The five forces determine industry profitability
because they influence the prices, costs, and
required investment of firms in an industry - the
elements of return on investment.
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John Macomber 4
Generic Competitive Strategies
• Positioning determines whether a firm's profitability is
above or below the industry average.
• A firm can have many strengths or weaknesses
relative to competitors, but:
• There are two basic types of competitive advantage:
low cost, or differentiation.
• There are two scopes of activity: broad or focused.
• Achieving competitive advantage requires a firm to
make a choice. Being "all things to all people" is a
recipe for strategic mediocrity and below average
performance, because it often means that a firm has
no competitive advantage at all.
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John Macomber 5